The Swiss economy unexpectedly shrank in the second quarter as the euro-zone crisis caught up with a country that had seemed relatively immune to its neighbours’ woes, providing further justification for the central bank’s cap on the strong franc.

The surprise 0.1 per cent contraction mirrors emerging evidence in Sweden, another euro outsider whose currency is attracting unwelcome strength, that the euro bloc’s problems are beginning to hurt previously resilient neighbours. Up to now the Swiss National Bank appeared to have succeeded in warding off the risks of recession and deflation by capping the value of the franc last September at 1.20 per euro, helping to keep the country’s high-value export industries competitive. – (Reuters)